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Author: Daniel Kuhn, CoinDesk; Compiled by: Tao Zhu, Bitchain Vision
On April 20, Bitcoin successfully made its fourth halving, which was a planned and substantial cut to the amount of new Bitcoin (BTC) entering circulation through mining.While the event itself is a bit exciting – people around the world can celebrate the moment virtually – many are paying attention to what is about to happen.
Runes is a new protocol that creates meme coins on Bitcoin, and its launch coincides with a halving.Hundreds of tokens have been launched, contributing more than $80 million in fees to Bitcoin miners.According to TokenTerminal, the increase in transaction activity has also pushed up the costs associated with Bitcoin sending transactions, with an average price of over $70, up 1,395.8% from the average price in the past 30 days.
While it is hard to say whether this activity will level up, some people think that “Epoch V”, i.e.The time before the next halving in 2028 will be the time when Bitcoin Layer 2, such as Lightning Network, finally becomes popular.
Bitcoin Core developer Ava Chow said in an interview with CoinDesk:“Any factor that causes a surge in fees may prompt people to seek other solutions.” “Lightning is an option. There are sidechains like Fedimint, Ark and a bunch of Layer 2s. High transaction fees will prompt people to study it..”
This is echoed by a recent Messari report that believes that as the on-chain activity levels continue to rise,“Bitcoin’s Layer 2 solution is not only a luxury, but a necessity,” he said.analyst Nikhil Chaturvedi wrote.Bitcoin is no longer just “digital gold”, but a building platform.
The launch of the Ordinals protocol last year inspired this mindset to be transformed, which enabled a new way to store data on the smallest unit of BTC, called “Sao”.Ordinal “Inscription” similar to NFT has sold more than $3 billion, and trading activity is on the rise, with an average transaction number approaching 2 million.
But Ordinals is not the only factor that pushes up Bitcoin fees.BitVM is a way to move computing off-chain, allowing people to build Ethereum-like smart contracts on Bitcoin.Babylon is building a way to stake and earn profits by holding BTC.Layer 2 such as Stacks and Merlin are becoming home to many decentralized applications and meme coins.
Interestingly,Since the halving, tokens related to Bitcoin L2 have performed better than BTC.For example, Elastos’ ELA tokens rose 11%, and SatoshiVM’s SAVM rose 5%.Stack’s STX token rose nearly 20% to $2.87.
While market forces may drive the action of Bitcoin Layer 2, this may not always be a good thing.Chow suggests that on the one hand, those with low Bitcoin balances who want to use Lightning Network unmanaged and build their own channels may be unable to use platforms such as Lightning Network because of the high price.
“The problem is,All of these Layer 2 require on-chain transactions,” Chow said, referring to the “inbound capacity” needed to fund Lightning accounts. Lightning Network users also have to pay for on-chain closing transactions.“In a high-cost environment, this means it’s a little harder to actually start using these things.”
Of course, there are some solutions: Hosting Lightning companies subsidize these surprisingly expensive deals.
“I’m worried that higher transaction fees will drive users to use hosted lightning services… leaving BTC users with no sovereignty or anonymity over the BTC they hold,” noted Sovereign Matt, anonymous Bitcoin holder and lightning critic. “Hosting Lightning Services will be a new bank/middleman that people have to trust because it is too expensive to use main chain bitcoin for self-custody and transactions.”
To some extent, all of this is an extension of the so-called “block size war” about how to expand Bitcoin years ago, when people decided not to increase the size of the Bitcoin block, but to expand the blocks through Layer 2chain.This puts Bitcoin on its current path.
“There are basically two schools of thought about increasing the number of transactions per block. You can make the blocks bigger and you can make the transactions smaller,” Chow said, adding,Expanding block capacity is like a “brute force” solution.
There are several ways to make Bitcoin transactions smaller, but before that, Layer 2 seems to be growing.
